As industrialisation started establishing its foothold in India, it brought with it the promise of economic growth, technological advancement, and job creation. But it also had a darker side in forms of industrial accidents, chemical spills, and exposure to dangerous substances that often left ordinary citizens at the mercy of the system. One incident redrew the landscape of industrial legislation for all time: the Bhopal Gas Tragedy of 1984. Many people died, and even to this day the effects are felt by many who survived. This disaster highlighted the urgent need for a law that would hold industries accountable and provide immediate relief to victims.
The answer was provided in the shape of the Public Liability Insurance Act, 1991. This legislation was a turning point, and it meant that those who are affected by accidents involving hazardous substances would not have to wait years in the courtroom to get compensated. Instead, they could be provided with an immediate relief by means of a compulsory insurance scheme designed for such cases.
In this article, we will dive deep into the Act – its history, purpose, provisions, and why it’s still so important today.
Background and Purpose of the Act
The Bhopal Gas Tragedy was not only an industrial disaster but it was a wake-up call for India and the world. More than 3,000 people died immediately, and more than half a million were exposed to methyl isocyanate gas. Victims suffered long-term health problems, disabilities and intergenerational impacts. Yet, legal claims for compensation took decades to process, and many families received little compensation.
In view of this, the Government of India realised that existing laws were not enough to handle the aftermath of industrial accidents. The Public Liability Insurance Act, 1991 was passed with a clear objective:
- To make it mandatory for industries handling hazardous substances to take insurance coverage.
- To ensure that victims of accidents involving such substances receive immediate and adequate relief.
- To create a strict public liability, meaning that industries would be liable regardless of negligence.
The Act was thus intended to create a balance between industrial development and public safety.
Meaning of Public Liability Insurance under the Act
Public Liability Insurance, under this Act, is essentially a mechanism for providing financial protection to victims of accidents caused by hazardous industries.
In other words, if an accident takes place in a factory, refinery, chemical plant, or any other industrial unit that involves hazardous materials, the affected public will be able to claim compensation directly through this insurance.
Certain key features include:
- Mandatory Insurance:Liability insurance is mandatory for all owners or occupiers who handle hazardous substances.
- Strict Liability:Victims do not need to prove negligence They are entitled to relief on the mere occurrence of an accident.
- Immediate Relief: Unlike traditional legal proceedings that can take years to resolve, compensation is provided swiftly.
Public Liability Insurance, therefore, is not merely a safety net for industries. Rather, it’s a lifeline for communities that live around them.
Applicability of the Act
The Public Liability Insurance Act, 1991 is a broad-based legislation and applies to any person or organization dealing with hazardous substances. “Hazardous substances” does not refer only to obvious chemicals such as acids or gases. The Act takes the definition from the Environment Protection Act, 1986 which includes a wide variety of substances which could cause harm to human beings, living creatures, property or the environment.
Industries and businesses covered:
- Chemical factories
- Refineries and gas plants
- Pesticide and fertiliser units
- Mining operations
- Pharmaceutical industries using hazardous solvents
- Large storage facilities handling flammable or toxic substances
The law makes it clear that owners or occupiers of these units are responsible. “Occupier” here refers not only to the owner, but to anyone who has control over the industrial premises.
Key Provisions of the Public Liability Insurance Act, 1991
The Public Liability Insurance Act, 1991 contains several important provisions which govern its operation in practice. Some of these are:
1. Mandatory Insurance
All owners or occupiers who handle hazardous substances are obliged to purchase insurance policies from authorised insurers. The amount of insurance should be equal to their paid-up capital (subject to specified limits).
2. Role of the Insurer
Insurance companies have a duty to offer compensation when accidents occur. Additionally, insurers cannot refuse insurance coverage on technical grounds after the accident has occurred, thus protecting the rights of the victim.
3. Creation of the Environmental Relief Fund
The act envisages the setting up of the Environmental Relief Fund (ERF), which will be funded by industry contributions, in addition to the insurance premiums. This fund serves as a backup source for payments to third party victims, if necessary.
4. Immediate Relief Without Legal Obstacles
The victim or the victim’s family does not need to prove that the accident was due to negligence or fault. Compensation is paid on a “no-fault” basis, which is innovative in comparison to traditional third-party liability regulations.
5. Strict Liability Principle
The Act adopts the principle of strict third-party liability, meaning industries cannot escape responsibility even if the accident was not directly caused by negligence. The fact that hazardous substances were involved is enough to trigger liability.
Rights and Relief for Victims under the Act
One of the most empowering aspects of the Public Liability Insurance Act is the way it safeguards the rights of third-party victims.
Categories of Relief Available:
- Death: Families of victims who die in an accident are entitled to relief.
- Injury: Victims suffering physical injury or disability can claim compensation.
- Property Damage: Compensation for loss or damage to third-party property is also covered.
The relief amounts, while fixed in the Public Liability Insurance Act, are meant to ensure immediate financial support—medical treatment, funeral costs, or essential living expenses.
The compensation amounts are fixed in the Public Liability Insurance Act in such a way that immediate financial assistance can be provided to the victims- be it for medical treatment, funeral expenses or necessary living expenses.
Another feature is that the victims can address themselves to the Collector of the District to make claims of third-party liability. This eases the process and prevents prolonged litigation.
Duties and Responsibilities of Owners/Occupiers
Owners and occupiers of an industry involved in hazardous substances have specific obligations to follow- as per the Public Liability Insurance Act, 1991:
- Insurance Coverage:
They are mandated to purchase liability insurance policies that cover their industrial activities. - Contribution to ERF:
Over and above the insurance premiums, they also have to contribute to the ERF( Environmental Relief Fund). - Compliance with Regulations:
They must continually renew their liability insurance policies, uphold safety standards and prevent gaps in insurance coverage. - Penalties for Violations:
Non-compliance with the Public Liability Insurance Act, 1991 will result in fine, imprisonment, or even closure of industrial units.
The Act thus guarantees that industries cannot get away with substandard safety practices and accountability.
Significance of the Act in Today’s Context
Three decades after its enactment, the Public Liability Insurance Act is still very relevant. Industrial growth in India has been rapid, and chemical hubs, refineries, and energy plants are spread throughout the country. While industries are an important driver of economic growth in India, they also pose risks to workers and to communities as a whole.
Recent incidents such as the Vizag Gas Leak (2020) which took the lives of 12 people and affected thousands are a reminder that industrial accidents remain a serious threat. In such situations, the provisions mentioned in the Public Liability Insurance Act, 1991 can play a crucial role in providing timely relief.
In addition, the Act strengthens the concept of corporate accountability. It reminds industries that profitability should not be achieved at the expense of public safety. For communities, it provides a legal assurance that their lives and property are not left unprotected.
Limitations and Criticisms of the Public Liability Insurance Act, 1991
The Public Liability Insurance Act 1991 was considered a path-breaking legislation when it came into force. However, today it is not without its fair share of limitations.
- Outdated Compensation Amounts: The compensation amounts established in the early 1990s for this Act are no longer sufficient. This is because healthcare costs and inflation have increased considerably.
- Issues in Implementation: Many smaller industries and businesses either underinsure themselves or escape compliance altogether. Regulatory authorities are often under-resourced to be able to monitor effectively.
- Exclusion of Long-Term Impacts: This Act is more concerned with immediate relief . However, it does not offer comprehensive long-term rehabilitation for victims ( for example, those suffering from chronic health problems resulting from chemical exposure).
Many legal experts and environmental advocates claim that the Act needs to be amended to improve the protection of victims, and that industries should be held more responsible.
Final Thoughts:
The Public Liability Insurance Act, 1991 is one of the most important legislations in India’s industrial and environmental system. Born out of the bitter lessons of the Bhopal Gas Tragedy, it guarantees timely relief to victims of accidents involving hazardous substances without the need to prove negligence.
With the implementation of this Act, through mandating insurance coverage, the establishment of the Environmental Relief Fund, and the introduction of strict liability, a safety net has been formed to protect millions of residents who live in close proximity to industrial sites.
Yet, the law is not always perfect. Out-of-date compensation limits and uneven enforcement can hamper the cause of the stakeholders. Hence, the Act needs to be updated urgently to be effective in today’s industrialized economy.
In a country like India – where industrialisation is expanding rapidly – the Act acts as a reminder: progress and profit must always be balanced with public safety and environmental responsibility.
